Sagus Speaks September 2025 | Part I

This Newsletter covers key Regulatory & Policy Updates, Government Notifications and Judicial Pronouncements.

REGULATORY AND POLICY UPDATES

SEBI amends the Real Estate Investment Trusts Regulations

The Securities and Exchange Board of India ("SEBI") vide Notification No. SEBI/LAD-NRO/GN/2025/258 dated 01.09.2025 has introduced the SEBI (Real Estate Investment Trusts) (Second Amendment) Regulations, 2025 ("REIT Amendment Regulations")¹ . The REIT Amendment Regulations further amend the SEBI (Real Estate Investment Trusts) Regulations, 2014.

Key highlights of the REIT Amendment Regulations are as follows:

1. The definition of "public" under Regulation 2(1)(ze) has been substituted, explicitly clarifying the exclusion of related parties of a Real Estate Investment Trust ("REIT"), its sponsors, and managers from the public category.
2. Changes to reporting timelines and disclosure requirements for REIT managers regarding quarterly financial results, valuation reports, and compliance status have been notified, aligning these with timelines as specified by SEBI instead of fixed day periods.
3. A new proviso in Regulation 10(18) requires valuation reports under Regulations 21(4) and 21(5) to be simultaneously submitted to the trustees when filed with the stock exchange(s).
4. Furthermore, it has been clarified that if net distributable cash flow at holding company level is negative, then it may adjust it against the cash flows received from its underlying special purpose vehicles ("SPVs"), provided specific disclosures are made to unitholders as specified by SEBI.
5. Amendments to Regulation 21 have been made to recalibrate the timeline and synchronisation of annual and half-yearly valuation reports with the submission of annual and September quarter financial results, including simultaneous filing with the stock exchanges and timely disclosures to unitholders.

The REIT Amendment Regulations came into force from the date of publication in the Official Gazette, i.e., 03.09.2025.

SEBI introduces provisions for delisting of PSUs under the Delisting Regulations

SEBI, by way of Notification No. SEBI/LADNRO/GN/2025/257 dated 01.09.2025, has introduced the SEBI (Delisting of Equity Shares) (Amendment) Regulations, 2025 ("Delisting Amendment Regulations")² providing provisions for delisting of Public Sector Undertakings ("PSUs") under the SEBI (Delisting of Equity Shares) Regulations, 2021 ("Delisting Regulations").

SEBI has introduced a new Part-F in Chapter VI of the Delisting Regulations, establishing a streamlined framework for delisting PSU equity shares, excluding banks, NBFCs, and insurance companies. Under this framework, the acquirer along with other PSUs must collectively hold at least 90% (ninety per cent) of the issued shares of the relevant class. The delisting must be approved by the shareholders of the PSU through a special resolution.

The Delisting Amendment Regulations mandate that delisting must be undertaken through the fixed price process, with the floor price not being less than the highest of three determinants, which include (i) the volume weighted average price paid by the acquirer and persons acting in concert during the 52 (fifty-two) weeks immediately preceding the reference date, (ii) the highest price paid by such parties during the preceding 26 (twentysix) weeks, and (iii) the price determined under a joint valuation report obtained from two independent registered valuers using industry-standard valuation parameters. Importantly, the actual delisting price must be at least 15% (fifteen per cent) higher than the determined floor price.

For PSUs undergoing voluntary strike-off within 1 (one) year of delisting but not later than 30 (thirty) days from the expiry of such 1 (one) year period, comprehensive investor protection measures have been established. The amount due to the remaining public shareholders who have not tendered their shares in the delisting process shall be transferred to a specified account of the designated stock exchange, which shall hold such amount for 7 (seven) years during which investors may claim their dues. After completion of this 7 (seven) year period, such amount shall be transferred to the Investor Education and Protection Fund established under the Companies Act, 2013 ("Act"), or alternatively to SEBI's Investor Protection and Education Fund if the transfer cannot be effected under the Act.

The Delisting Amendment Regulations shall apply to delisting offers where initial public announcement has not been made. The Delisting Amendment Regulations came into force from the date of publication in the Official Gazette, i.e., 03.09.2025.

SEBI notifies Third Amendment to InvIT Regulations

SEBI, by way of Notification No. SEBI/LADNRO/GN/2025/259 dated 01.09.2025 has introduced the SEBI (Infrastructure Investment Trusts) (Third Amendment) Regulations, 2025 ("InvIT Amendment Regulations")³ which amend the SEBI (Infrastructure Investment Trusts) Regulations, 2014 ("InvIT Regulations").

The key changes include, inter alia:

1. Definition of "public" has been revised to exclude sponsor, sponsor group, investment manager, and project manager (related parties), except where a Qualified Institutional Buyer is an investor under an offer.
2. Regulation 10 has been amended to align the timing and manner of submission of fund flows, compliance status, performance reports, and valuation reports with financial reporting timelines prescribed by SEBI.
3. Reduced threshold for investment in certain cases from INR 1 Crore (Indian Rupees One Crore) to INR 25 Lakhs (Indian Rupees Twenty-Five Lakhs).
4. In cases where the holding/parent company has negative distributable cash flows, it may discharge debt obligations from underlying SPV cash flows, subject to necessary disclosures to unitholders.
5. Strengthened valuation reporting requirements, including annual and half-yearly valuations, with additional quarterly valuation obligations if consolidated borrowings and deferred payments exceed 49% (forty-nine per cent) of InvIT assets.
6. Strengthened quarterly and half-yearly disclosure norms to align with financial statement submissions to stock exchanges.

The InvIT Amendment Regulations came into force from the date of publication in the Official Gazette, i.e., 03.09.2025.

SEBI amends SBEB Regulations to allow promoter group to continue with granted employee benefits

SEBI, by way of Notification F. No. SEBI/LADNRO/GN/2025/262 dated 08.09.2025 has issued the SEBI (Share Based Employee Benefits and Sweat Equity) (Amendment) Regulations, 2025 ("SBEB Amendment Regulations")⁴ to amend the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 ("SBEB Regulations").

SEBI has introduced a new Regulation 9A which provides that an employee who is identified as a "promoter" or part of the "promoter group" in the draft offer document filed by a company with SEBI in relation to an initial public offering, i.e., the draft red herring prospectus, and who was granted options, Stock Appreciation Rights ("SAR") or any other benefits under any scheme at least 1 (one) year prior to filing of the draft offer document, shall be eligible to continue to hold and/or exercise such options, SAR or any other benefits, in accordance with its terms and subject to compliance with the SBEB Regulations and other applicable laws.

The SBEB Amendment Regulations came into force from the date of publication in the Official Gazette, i.e., 08.09.2025.

SEBI amends LODR Regulations for compulsory demat securities issuance post arrangement and revised SSE compliance

SEBI, by way of Notification No. SEBI/LADNRO/GN/2025/261 dated 08.09.2025 has issued the SEBI (Listing Obligations and Disclosure Requirements) (Third Amendment) Regulations, 2025 ("LODR Amendment Regulations")⁵ to amend the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("LODR Regulations").

The key amendments are as follows:

1. A new Regulation 39(2A) has been introduced whereby listed entities are now required to issue securities only in dematerialised form following any Scheme of Arrangement or sub-division, split or consolidation of securities. For investors without demat accounts, listed entities are required to open separate demat accounts for such securities.
2. Regulation 91C(1) has been substituted to state that all Not for Profit Organizations ("NPOs") registered on Social Stock Exchanges ("SSEs"), including those with listed designated securities, must now make annual disclosures with financial aspects by October 31st of each year or before the due date of filing of income tax return, whichever is later. The annual disclosures for non-financial aspects are to be made within 60 (sixty) days from the financial year end.
3. Regulation 91(E) is amended to replace 'Firm' with 'Organization' for Social Impact Assessors and establishes differentiated requirements where listed projects need professional assessment while nonlisted projects may be self-certified. Further, annual impact reports must cover at least 67% (sixty-seven per cent) of program expenditure, and NPOs have a 2 (two) year grace period to raise funds postregistration and list at least one project, failing which they shall cease to be registered.
4. Amendments have been incorporated under Schedule VII (Transfer and Transmission of Securities under Section 40(7) and 61(4)) eliminating the requirement to maintain proof of delivery in the record(s) of listed entities from Clauses B(1) and B(2).

The LODR Amendment Regulations came into force from the date of publication of the Notification in the Official Gazette, i.e., 08.09.2025.

SEBI amends AIF Regulations to include coinvestment schemes and revise framework for angel funds

SEBI, by way of Notification No. SEBI/LADNRO/GN/2025/265 dated 08.09.2025 has introduced the SEBI (Alternative Investment Funds) (Second Amendment) Regulations, 2025 ("AIF Amendment Regulations")⁶ to amend the SEBI (Alternative Investment Funds) Regulations, 2012 ("AIF Regulations").

Through this amendment, SEBI has revised the regulatory framework for co-investments and angel funds under the AIF Regulations. The key changes include, inter alia:

1. A new regulatory framework for co-investments has been created. Previously, the AIF Regulations did not separately define or regulate co-investments made by investors alongside AIFs. Under the amended regime, SEBI has introduced definitions of "Co-investment", "Co-investment Scheme" and "Shelf Placement Memorandum".
2. Investors in Category I and II AIFs can now participate in co-investments only through a coinvestment scheme ("CIV Scheme") registered under the AIF Regulations or through a SEBI registered Co investment Portfolio Manager. A separate CIV Scheme must be launched for each transaction, and a shelf placement memorandum must be filed with SEBI through a merchant banker, accompanied by a filing fee of INR 1,00,000 (Indian Rupees One Lakh). Importantly, only accredited investors ("AI") are permitted to participate in the CIV Schemes.
3. Each CIV Scheme is restricted to investing in a single investee company and is prohibited from investing in units of other AIFs. SEBI has further mandated that the terms of a co-investment cannot be more favourable than those offered to the AIF itself, and that the timing of exit from such investments must mirror the exit of the AIF. CIV Schemes are required to be wound up immediately after exit from the coinvestment.
4. Alongside this, SEBI has substantially revised the framework governing angel funds. The concept of "angel investors" has been aligned with that of AIs, and the earlier requirement for minimum investment thresholds by angel investors has been removed, thereby offering greater flexibility
5. Angel funds are now permitted to invest only in startups that are not promoted or sponsored by corporate groups with a turnover exceeding INR 300 Crore (Indian Rupees Three Hundred Crores). While this condition restricts the scope of eligible investee companies, SEBI has allowed follow-on investments in existing investee companies that cease to qualify as start-ups, provided such investments comply with conditions specified by SEBI.
6. Further, each investment by an angel fund must now include contributions from at least two AIs, and angel funds are prohibited from accepting contributions from investors who are related parties of the investee company.
7. The AIF Amendment Regulations also impose enhanced disclosure and approval obligations on fund managers. Managers of angel funds must disclose all investment opportunities to investors, obtain their prior approval before accepting contributions, and adopt a defined methodology for allocation of investments, which must be disclosed in the placement memorandum. SEBI has also clarified that investors' rights in investments and proceeds must be proportionate to their contributions, ensuring equitable treatment of all participants.
8. In addition to the existing fees applicable to AIFs, a fee of INR 1,00,000 (Indian Rupees One Lakh) is now payable for filing a shelf placement memorandum for launching CIV Schemes, and angel funds are required to pay a refiling fee of INR 1,00,000 (Indian Rupees

One Lakh) if they fail to declare the first close of the fund within the prescribed timeline and need to refile their placement memorandum.

The AIF Amendment Regulations came into force on 09.09.2025, being the date of their publication in the Official Gazette.

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Footnotes

1. SEBI (Real Estate Investment Trusts) (Second Amendment) Regulations, 2025.

2. SEBI (Delisting of Equity Shares) (Amendment) Regulations, 2025.

3. SEBI (Infrastructure Investment Trusts) (Third Amendment) Regulations, 2025.

4. SEBI (Share Based Employee Benefits and Sweat Equity) (Amendment) Regulations, 2025.

5. SEBI (Listing Obligations and Disclosure Requirements) (Third Amendment) Regulations, 2025.

6. SEBI (Alternative Investment Funds) (Second Amendment) Regulations, 2025.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.